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On the surface, the financial story seems like it should be different: Twitter is where news breaks, and where the President of the United States shapes policy on a near-daily basis. Facebook is where your mom hangs out.

But billions of dollars of advertisers' money chasing relevance and influence have flowed overwhelmingly to the latter.

On Wednesday, Facebook again showcased its bonanza growth, as revenue climbed nearly 45 per cent to $9.32-billion (U.S.) in the second quarter. The news drove its stock to a record high in after-hours trading. On Thursday, Twitter's stock took a beating after it reported a loss of $116.5-million, relatively stagnant user growth and an 8-per-cent drop in ad revenue.

A comparison of the two social-media platforms is precarious because they are so different: Twitter is an agora of public conversation and live news visible to the entire Internet, while Facebook is a tailored personal network of friends and family. Still, their divergent fortunes highlight key shifts in the business of digital media.

Facebook has done well, partly, because of its incredible reach: now with more than two billion regular users and rising. Twitter, with 328 million monthly active users, is never going to have that kind of scale and looks more like a niche product.

"There were many advertisers who spent money on Twitter because of its 'bright, shiny object' status a few years ago. Much of that spending has evaporated to some degree, as many advertisers lacked a solid justification for why they spent what they spent or may have lacked a broader strategy around using Twitter in their campaigns," Pivotal Research analyst Brian Wieser wrote in a note Thursday. "However, there are still many others who consider Twitter to be a unique, if supporting platform that helps those marketers meet their goals."

Twitter has been meeting with its most important advertisers and their agencies to discuss how the company can improve its offerings. And it has dropped its ad prices by about 50 per cent over time. Advertising partners "understand and applaud our focus and differentiation on Twitter, is the best at showing you what's happening and what people are talking about," chief operating officer and chief financial officer Anthony Noto said on a call to discuss Twitter's earnings on Thursday. "They think that's a very differentiated positioning than our competitive peers."

What both businesses have going for them is their popularity on mobile platforms: advertisers know that they have to be on mobile, and that is overwhelmingly where social media happens: 89.3 per cent of users in the United States and Canada access their accounts that way, according to research firm eMarketer.

They have also both been aggressively expanding into video ads, which drive the bulk of revenue growth and which outperform static digital ads, according to company research. Facebook has expanded the video ad formats it sells, while Twitter has been live streaming more events such as concerts and some Major League Baseball games, and signing ad partnerships to sponsor them.

But a big difference is targeting – the holy grail of digital advertising regardless of format. Facebook knows details about its users' lives that aren't generally available to advertisers on other digital platforms. This has helped to stoke advertiser interest, even as concerns have been raised about the reliability of Facebook's metrics for demonstrating advertising effectiveness. Advertisers have been pushing for more third-party verification of ad performance, and have said that "walled gardens" such as Google and Facebook are getting away with marking their own homework. But, attracted by their phenomenal reach, advertisers have generally been willing to continue spending money with those companies even as they push for better measurement. Facebook has also drawn marketers by consistently offering more ways to reach people. One recent example is its announcement of the intention to sell ads in Facebook Messenger, its private message feed.

It's unlikely that Facebook can keep up this pace – and it signalled this week that it is headed for a slowdown in growth. But crucially, the company's free cash flow has remained stable even as it has invested more heavily in hiring, new ad measurement and new products.

"We believe this ability to continue to invest in new initiatives will widen Facebook's competitive lead vs. other platforms," Morgan Stanley analyst Brian Nowak wrote in a research note.

"Twitter is really lagging in innovation.They've tried things like live video streaming, with the NFL for example, and those are interesting. But they're not moving at the pace of their competitors," said Erica Kokiw, vice-president of digital for media buying firm UM Canada. "Twitter has a role, but clients aren't usually saying 'We need Twitter in this plan.' They've fallen out of love, to some extent." However influential a tweeting U.S. President may be, the place where people spend the most time, and have the most personal interactions, is where advertisers flock. Right now, that's not Twitter.

"[Facebook and Google] have a lot of people on their platforms, a lot of reach. They also have really rich data because it's personal, identifiable. They know who the individuals are," Ms. Kokiw said. "They have their challenges, but over all, clients see the value."

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